Janus Henderson Group PLC

NYSE:JHG

Earnings Call Transcript 2018-Q1

[Operator]

Good morning. My name is Nicole, and I will be your conference facilitator today. Thank you for standing by, and welcome to the Janus Henderson First Quarter 2018 Earnings Conference Call. [Operator Instructions] In today's conference call, certain matters discussed may constitute forward-looking statements. Actual results could differ materially from those projected in these forward-looking statements due to a number of factors, including, but not limited to, those described in the forward-looking statements and risk factors sections of the company's most recent Form 10-K and other more recent filings made with the SEC. Janus Henderson assumes no obligation to update any forward-looking statements made during the call. Thank you. Now it is my pleasure to introduce Andrew Formica, Co-Chief Executive Officer of Janus Henderson. Mr. Formica, you may begin your conference.

[Andrew Formica, executive]

Welcome everyone, to our first quarter 2018 earnings call for Janus Henderson. I'm joined by Dick and Roger, and today Roger will be taking you through the results for the quarter, and then after his prepared remarks, we'll be happy to take your questions. Before we start, as you know, we take a long-term view of our business versus the short-term view that is inherent in quarterly reporting. To that extent, going forward, Roger will be providing you with updates on the quarterly flow performance and financial results on our first and third quarter calls, and we will use the second and fourth quarter calls to address these same items, along with a more detailed discussion on the business and our strategy from Dick and myself. We believe this change will help better align our calls with the way we manage our business. With that said, let me turn it over to Roger to walk you through the first quarter results.

[Roger Thompson, executive]

Thanks, Andrew, and thank you, everyone, for joining us. The first quarter results can be characterized by 3 points: First, investment performance continues to be strong. Second, we finished the quarter with slightly higher assets under management, despite market volatility and net outflows experienced during the quarter. And third, the financial results were strong, and reflect the growing economies of scale in our business and our ongoing delivery of synergies. Investment performance as of 31st of March, remains solid with 68% of firm-wide assets meeting their respective benchmarks over the 3-year time period, improving slightly from the prior quarter.

With the return of volatility and increased dispersion between stocks and sectors, that we saw in the quarter, it was very encouraging to see our first quarter investment results be so strong. Total company net outflows whilst improved compared to the prior quarter, are still far away from where we want them to be. Despite the outflows, we remain optimistic about future prospects, given our global distribution footprint, our range of product offerings, and our good investment performance. Our financial performance remained strong. With adjusted operating margins slightly above 40% reflecting AUM growth and the benefits of the merger.

And finally, today we announced that the board has declared a quarterly dividend of $0.36 per share, which is an increase of 13% from the previous level. Moving to investment performance, which is on Slide 3. Overall, performance remains very good, and importantly, as you'll see on the right-hand side of the page, it's improved on a year-over-year basis across the 1, 3 and 5-year time periods. Performance in the quantitative equity capability, which is the INTECH business has seen the biggest gains as performance has been consistently strong since the end of 2016. INTECH's strong 1-year performance with 91% of assets outperforming benchmark is helping drive a better 3-year number, which while still low at 46%, represents a significant improvement over the 12% of assets beating their benchmark a year ago. We are pleased with these investment results, and they provide the foundation for the future growth in the business. As we approach the 1-year mark, since the merger, these results are indicative of the high-quality investment professionals Janus Henderson has working for our clients. Now turning to total company flows. For the quarter, net outflows were $2.7 billion compared to $2.9 billion last quarter. Whilst the quarterly result is still not where we would like it to be. The improvement quarter-over-quarter reflects positive flows into INTECH and good institutional sales in the Asia Pacific region. Partially offsetting these improvements, were outflows in our intermediary business in both the U.S. and Europe.

Moving to Slide 5, which shows the breakdown of flows in the quarter by capability. Equity net outflows for the first quarter declined to $1.8 billion as a result of increased outflows in our Retail channel, which was driven predominantly by outflows from our European equity strategies. Flows into Fixed Income, were negative in the quarter at $300 million. This resulted from outflows in our U.S. intermediary and EMEA institutional clients offset by a good result in our APAC institutional business. Fixed Income flows includes a mandate funding from TAL Life Limited, Australia's leading life insurance specialist. TAL is a wholly-owned subsidiary of Dai-ichi Life, and we are thankful to Dai-ichi Life for their strategic partnership and continued support of Janus Henderson. Another area of positive results came from INTECH. Net inflows of $300 million during the quarter, represented the first positive quarter of flows since Q1 2016. We understand that 1 quarter of good results is not a trend, nevertheless, we remain optimistic about the future opportunities for this business. Multi-asset flows, were $100 million in the quarter, an improvement over the prior quarter.

Finally, alternative net flows were negative $1 billion. This decline from the prior quarter was due to outflows from the U.K. Absolute Return equity strategy mainly in Europe, and outflows from the absolute return bond strategy, which was a result of the effects of a [ PM ] change last September, which we've discussed previously.

Slide 6, is our standard presentation of the U.S. GAAP statement of income, which I won't spend any time on. Now turning to Slide 7, we'll look at few of the financial highlights. First quarter results were strong. While down from the previous quarter, you'll see the improvements across the board on a year-over-year basis, which reflects higher assets under management, cost synergies being realized, and good financial discipline. Average AUM in the first quarter increased 3% over the fourth quarter, primarily driven by positive markets, beneficial currency movements, and alpha generation. Despite the increase in average assets, total adjusted revenues for the first quarter decreased 7% compared to Q4 as lower performance fees more than offset higher management fees. Adjusted operating income in the first quarter of $189 million was down 14% over the prior quarter primarily as a result of the lower performance fees. Compared to the first quarter of last year, adjusted operating income improved by 31%. First quarter adjusted operating margin was 40.1% compared to 43.6% in the prior quarter and 35.4% a year ago. Finishing up the financial highlights, adjusted diluted EPS was $0.71 for the first quarter compared to $0.73 for the prior quarter, and up 42% from $0.50 a year ago.

On Slide 8. We've outlined the revenue drivers for the quarter. Performance fees were the biggest driver of the quarterly change in adjusted total revenue. First quarter fees were negative $4 million compared to positive $34 million in the fourth quarter and a positive $1 million in the same period last year. Compared to the prior quarter, performance fees were primarily impacted by weak quarterly performance of our U.K. Absolute Return strategy. Regarding mutual fund performance fees, the first quarter improved to a negative $8 million, from negative $9 million in the prior quarter, and more significantly, from negative $13 million a year ago. The quarterly improvement was driven primarily by the Forty Fund. On a year-over-year basis, the improvement was from several funds, most notably, the Forty Research and Mid Cap Value funds. Management fees increased 1% from Q4, roughly in-line with the increase we saw through average AUM, which is partially offset by 2 fewer days in the quarter. Net management fee margin for the first quarter was 44.9 basis points, relatively flat compared to Q4. Before moving on, I wanted to point out the change in presentation of revenues and distribution expenses. Based on amended accounting guidance that went into effect in 2018, the presentation of distribution fees will now be made on a gross basis. In doing so, the firm has reclassed certain prior year amounts to conform to the 2018 presentation. The financial results of the fourth quarter have been recast to conform to the new presentation and reflect the impact of the new revenue recognition guidance. That said, on an adjusted basis, the way we discussed the business, this change will not have an impact on distribution expenses and netted against revenue.

Moving to operating expenses on Slide 9. The first quarter had adjustments associated with non-deal costs, as well as integration. There was approximately $6 million of integration costs incurred during the quarter. So far, we recognized approximately $208 million of the $250 million deal and integration costs we expect to incur. Non-deal costs, adjusted out of operating expenses in the quarter were roughly $7 million, and mostly, consisted of intangible amortization and investment management contracts and contingent consideration.

Adjusted operating expenses for the first quarter were $282 million compared to the fourth quarter amounted to $285 million, a 1% decrease quarter-over-quarter. Adjusted employee compensation, which includes fixed and variable staff costs were down 12% compared to prior quarter. Usually, first quarter compensation is seasonally higher, however, we didn't experience that in this quarter for a few reasons: First, there was the final adjustment to 2017 bonus split between cash and noncash compensation, which led to a onetime reduction in the first quarter compensation of approximately $12 million. Second, given the lack of performance fees earned in the quarter that was considerably less compensation related to performance fees compared to Q4.

Adjusted long-term incentive compensation was up 15%, primarily due to adjustments made in the prior quarter, related to purchase price accounting. To aide in understanding the LTI expense line, we've included a schedule in the appendix that outlines long-term incentive grants made each year and the expected amortization of those grants overtime. We hope you will find this useful. The first quarter adjusted compensation to revenue ratio was 39.1%, which is abnormally low, because of the one-off $12 million adjustment that I previously mentioned. Adjusting for this onetime item, the compensation ratio in the quarter, was 41.6%, which is in line with the low '40s that we communicated previously.

Turning to adjusted noncomp operating expenses collectively, there was an increase of 12% quarter-over-quarter. The main drivers of the increase were higher G&A, partially offset by lower marketing costs. G&A was up $13.8 million, due to $12 million legal outcome, and $4.2 million accrual for the cost of research. The 20% decrease in marketing was primarily due to the completion of a targeted advertising campaign. Lastly, I wanted to give an update on our progress against our cost synergies. As of the end of March, we had exceeded the $90 million target, which we'd hope to achieve by the end of May. With $96 million of annualized run rates, cost synergies realized. This includes the impact of the expanded strategic relationship with BNP Paribas that closed at the end of the first quarter. This resulted ahead of our original schedule, and we're very pleased with the ongoing execution. Our targeted annual cost synergies remain at $125 million by the end of year 3 post-merger close.

Turning to Slide 10. And a look at our profitability trends. We continue to generate strong operating profits and EPS. The first quarter adjusted operating income of $189 million is down quarter-over-quarter driven primarily by performance fees, but up $45 million on a year-over-year basis. I think it's important to note that even with the low performance fees in the quarter, adjusted operating margin was 40.1%, and represents an improvement of 470 basis points compared to the same period a year ago. This speaks to the growing economies of scale, and our execution of synergies in our business.

Turning to EPS. The first quarter does include the impact of the U.S. tax reform, that went into effect from January 1. For the quarter, our adjusted effective tax rate, was approximately 21% in the range of 21% to 23% that we guided to on last quarter's call, and which is still the range we expect going forward.

Slide 11, and a look at the balance sheet. Cash and investment securities totaled $1.4 billion, as of March 31. Our total debt decreased 13% during the quarter, as a result of $48 million of convertible, senior notes electing for early conversion, which was settled in cash for $82 million.

And finally, given the very strong liquidity position of the firm, I'm very pleased that the board has approved $0.36 per share quarterly dividend, an increase of 13% from our prior payout level.

Finally, we wanted to provide a bit more color around our management and the board who are returning capital to shareholders. We've just come through our seasonal low point in cash, which takes place each year in the first quarter following the payments of annual bonuses. Additionally, as we've discussed previously, there's been an elevated period of cash need in the business, over the last 10 months with dealer integration costs, as well as the conversion of the majority of our convertible notes. However, looking forward, the firm is expected to generate excess cash over the rest of the year, which is why we felt it's an appropriate time to discuss our philosophy around returning capital to our shareholders. Our capital management philosophy is one that looks at cash in hierarchy of means. First, we take aside cash for regulatory and liquidity means, contractual obligations, near-term debt maturities and a sustainable regular quarterly dividend.

Second, we evaluate opportunity to strategically grow the business, both organically and inorganically. And finally, if excess cash exists, we will review ways to return that cash to shareholders. For Janus Henderson this capital return program will be comprised of a regular quarterly progressive dividend one that grows with the profits of our business, which is supported by regular share repurchases. As noted earlier, today we've increased our quarterly dividend payment, which is the indication of our confidence in the future cash flow generating capabilities of our business. And last week, you all have seen it, we received renewed shareholder approval at the AGM to conduct a buyback. As such, our board intends to utilize this authorization from shareholders, and we are now in the process of working through the steps that are needed to initiate the program. We will update you all in due course as we finalize those plans and it is approved by the board. Management and the board take the responsibility of managing shareholder capital very seriously. And we believe the approach that I've laid out today will provide the framework for us to continue to be good stewards of this capital. With that said, I'd now like to turn this over to the operator for Q&A.

[Operator]

[Operator Instructions] And we'll take our first question from Ken Worthington with JPMorgan.

[Kenneth Worthington, analyst]

Maybe, first can you give us an update on the cross-selling of products between Henderson and Janus? Where are you starting to see successes? And can you give us some numbers around maybe the gross dollars that have come from cross-selling, either during the quarter or since the merger was closed?

[Andrew Formica, executive]

Hi, Ken, it's Andrew here. Look, there are evidence coming through in the results here. That include, we mentioned the TAL mandate in Australia, that also linked through the relationship with Dai-ichi. And that was into our historical Henderson capability. If we look at some of the success we are seeing in the U.S. Mutual Fund space, intermediary space in the U.S. that's the old Henderson funds are doing extremely well and running at significantly higher run rates than they were prior to that. And actually, we are seeing at the top 10 fund, an increase in growth into both sales and in the top 10 funds that we were seeing redeemed prior to the merger of the redemption rate are falling on those. So we're definitely seeing it. In terms of giving you hard numbers, Nicole, really we want to do is just focus on the quarterly numbers in here and at the half year we will think and spend a little bit more time on going into some of the details. But it's still very early days, we always sort of take up a year to get cross-sell benefits, but we're definitely seeing greater attraction and support from that. Clearly, improvement in numbers, I think I spoke to you once before saying INTECH was one of the improved areas we wanted see in the -- in Europe, and the numbers there are meaning we are starting to get some great attraction with clients over there on that front. So when you look at the products such as Life Sciences, the Balanced Funds doing well over in Europe, as well. The Forty funds, for example, which is Doug Rao representing North American equities now for us in Europe, there is number of key examples. But we will pick up in a bit more detail in the second half -- in the first half, second quarter numbers if that's okay.

[Kenneth Worthington, analyst]

Okay. Fair enough. And then can you talk about the impact that FX had on the results this quarter. Maybe what was the impact on revenue from FX in the weaker dollar? And what was the impact on OpEx from FX in the weaker dollar?

[Roger Thompson, executive]

Ken, the impact of FX is about $3 billion on assets. We are about 2/3 about 2/3 U.S. dollar about 20% Sterling, and so the residual split largely between the euro and Aussie dollar. So that as you say that will drive -- that will drive revenues, but we are relatively well naturally hedged on costs as well. So we obviously do also have costs in Sterling and Aussie and a smaller amount in euro. So that drives both revenues and expenses up, but I guess the easiest way to think about it is on an asset basis. And like you said, FX drove $3 billion on our $370 billion of assets.

[Operator]

And we'll move on to our next question from Kieren Chidgey with UBS.

[Kieren Chidgey, analyst]

2 questions, if I can. Roger, just keen to -- following from the framework you've outlined around how you're thinking about capital on Slide 12. How would you advise we think about that in a more quantitative framework? I mean, how should we be thinking about excess cash where the business is today? Can you give us any numbers?

[Roger Thompson, executive]

So. As I said, where we are at the moment is -- the board has looked at this and has asked that we look at putting a program in place, which means working through with a dual listing, working through that on both markets is a bit of process, as you know to set up to get that in place. And then the board will actually -- and get the ASX to approve it. And then the board will actually approve an amount. So we will let you know that as and when the board approve that. But broadly, as we said, we talked about a very disciplined process of returning a decent proportion of excess cash and when I say excess, I mean, in addition to anything the business uses or needs for future growth. This is a deal that we've done for growth. But we'll give you specifics, as and when the board approve that, relatively shortly.

[Kieren Chidgey, analyst]

But in relation to the $1 billion of net cash you've got today. You're not outlining to what the actual sort of requirements that you would see against that? And what the excess position today is?

[Roger Thompson, executive]

No, like I said, we will come out and very clearly with how much the -- how much any buyback would be. When the board have approved that.

[Kieren Chidgey, analyst]

And secondly, Andrew just on the institutional fund flow comments you made reference TAL in Australia being a fairly significant contributor? Was it largely concentrated around that? Or is it sort of a broader mandate we need to come through and sort of any comments on how the pipeline is building from an institutional point of view?

[Andrew Formica, executive]

Yes, in terms of TAL, I am sorry, we can't go into the details to that. But in terms of the institutional success we are seeing out of Australia, it's not just TAL we are actually seeing, quite good success in the Australian marketplace. Both with our domestic capabilities for example, our fixed income capabilities down there continue to do well. And also, some of our international capabilities in particular, emerging market equities have seen some success in the quarter from there. So it is quite broad-based. We are pleased to see it's both domestic and institutional -- international products sort of getting traction there in the Australian market is probably one of the areas where the business has done quite well through the merger, because of the mix of capabilities have really driven and increased our profile in the marketplace where both firms were probably outside of the top 20. And we are just outside of the top 10, now as a combined group.

[Operator]

And we'll take our next question from Andrei Stadnik with Morgan Stanley.

[Andrei Stadnik, analyst]

I wanted to ask a couple of questions. One on base fee margins, the other one on compliance costs. In terms of base fee margins, it's quite an impressive outcome for basically margins to remain flat quarter-on-quarter. Despite and by the sound of which relatively more inflows into [indiscernible] and some outflows from Retail. And that's coming in addition to earlier comments of your [indiscernible] clients aggressively reviewing existing price. And so kind of what's helping stabilize the base fee margins given some of these [indiscernible] headwinds?

[Roger Thompson, executive]

Hi Andrew, it's Rogers. I think it's a quarter-on-quarter, but I don't think anything has really changed I've said before that we -- we've talked about fee margin compression of around 1 basis point a year. And I don't think anything has really changed in that. Like you say we are pleased to see margins remain relatively constant on that. It is a mix of business, we are winning in some areas. Some of the institutional money that Andrew has just talked about the emerging market is obviously at a higher rate than the sort of cash type products. It is very much, very much dependent on the mix of business coming through, but I don't think there is any change in the trajectory on fee margin. So I think that's the most important thing for -- that you should be thinking about going forward.

[Andrei Stadnik, analyst]

And my other question just around compliance costs, you flagged recently that was an area where you've seen a little bit of pressure. And for example, you pointed to maybe needing 2 senior risk leaders, as opposed to just 1. So could we get a feel for what kind of percent of the cost base is related to compliance? And are you starting to see -- are you thinking that now with different U.S. administration perhaps the compliance costs growth will normalize?

[Roger Thompson, executive]

I think we've talked about over the last few years, both [indiscernible] organizations have talked about this being an area of an increased needs, and that was part of the reason of the deal, of the benefits of scale. So without a doubt, we are seeing that. There are some people out there, saying that the -- we, the industry are sort of over the hump. I'm not sure we would agree with that. There is a significant amount of work still to be done and the regulators all around the world, their expectations are higher than they were. So we don't expect that to decrease. In terms of the overall percentage cost of the business, I guess it depends how you define it. It is a part of everyone's job. It's not just the good sales we have in the compliance function or the risk functions. It is a part of everyone's job. So I guess if you added it up, it's a large amount. The narrow proportion of people are actually working in risk and compliance, it's obviously a smaller number.

[Unknown Executive]

[indiscernible] technology and [indiscernible] .

[Andrew Formica, executive]

Andrei, the only thing I'd add to Roger's comment about people saying across the hump. I think we're probably part a lot of the regulation -- new regulation coming in. So from the regulator's eyes, they may be saying, "They're passed the peak." But the implementation phase carries on. So for example, this month we've got obviously JDPR over here Europe to implement. We still have no idea of the final stake for Brexit, and that could be a significant cost for us, we are preparing for that, which we just don't know the impact of it. Until we know the rules and what's it like. So it certainly doesn't feel like from a cost side that the compliance burden that we've faced is abating at this point.

[Richard Weil, executive]

This is Dick, it's worth mentioning [indiscernible] still very early days and could settle out either higher or lower overtime.

[Operator]

And we'll take our next question from Alex Blostein with Goldman Sachs.

[Ryan Bailey, analyst]

This is actually Ryan Bailey filling in for Alex. I was wondering if you can dive into INTECH a little more. Can you give us a sense like where the flows came from? How we should think about performance year-to-date instead of on a one-year basis? And how the product should operate in a, I guess a higher volatility environment?

[Richard Weil, executive]

Yes. Ryan, thanks very much for the question. The first part of it was where did the flows come from. And for the first time in a while, we are happy to report that U.S. large cap had some significant inflow. So 1 quarter is too shorter a time to draw big lines from, but that's an encouraging sign. Remind me again, what was your follow-up?

[Ryan Bailey, analyst]

I guess just around year-to-date performance and then, if we have a pickup in volatility what that would mean for the products?

[Richard Weil, executive]

For the first part year-to-date performance has been encouraging. As we've talked about too many times before they put on a really rough 6 months in the back half of 2016, and they've been digging out since that point. And they've been doing a really good job. And they continue to outperform through this year. So that's all encouraging. But it's fair to say that -- we are still looking for to continue the improvement to get back to full health in sort of erase the pain of the second half of 2016. In terms of market volatility, INTECH makes money from relative volatility of stocks. So it's not a traditional measure of overall market volatility, it's not the index volatility, it is the volatility -- the relative volatility of the pieces in the index that really drives success for INTECH. And so, it's a little hard to predict with mathematical certainty as they would want to do, but from a layman's point of view, I think, nontrending markets with volatility are good for them. And we continue to be very optimistic about their future. But it's fair to say they've got to keep putting on the good numbers to fully overcome the pain of the second half of 2016.

[Ryan Bailey, analyst]

Got it. And then if I could also just ask the $12 million that showed up in G&A from legal expenses, what drove that?

[Roger Thompson, executive]

This is the second of the legal case we had against an ex-employee that has been referred to as the peace case.

[Operator]

And we'll take our next question from Patrick Davitt with Autonomous Research.

[Patrick Davitt, analyst]

Could you give us an update on how you are finding your positioning amid the pension consolidation process in the U.K.? Any notable anecdotes around keeping accounts as that plays out, winning new accounts as that plays out?

[Andrew Formica, executive]

Not real update I will give the change certainly on a quarterly basis. We are very well positioned in the U.K. institutional marketplace, very well-known and get very high-grade for not just of the investment products we have, but also the service we're giving that -- in that channel. Obviously as we went through the merger a number of fee consultants sort of put us on watch while they looked through the merger and where used the last quarter, this quarter, as update on how things are going, and they're going quite well. So I certainly think the strengthening of the product line that we have has only improved our position as the industry here like other industry sort of consolidates and looks to more key detailed partnerships rather than sort of to have fewer names but a deeper relationships. We see ourselves are well positioned, particularly through the merger, and therefore the capabilities we've got from that. And that's definitely coming out from the conversations I mentioned earlier, like INTECH being with their improved numbers actually being quite strong in the demand in terms of some of the positions we are taking out. And that's definitely reflected in the U.K. marketplace.

[Patrick Davitt, analyst]

Great. And then maybe for Dick, last week, we got, I guess probably the most definitive comment from a U.S. Retail Manager that they needed to rationalize fees lowers, noting tax reform is an opportunity to do that. Could you speak to the U.S. business exposure to that kind of trend? And if you've been through a similar review recently in the U.S.?

[Richard Weil, executive]

I'd say we've been through a fairly constant set of reviews. If you look across our key partners in the industry, they have been in a fairly regular downsizing of the number of funds they have on their platforms, and the number of partners they have. And a fairly regular drumbeat of conversations around fees as well. So I don't think this is a -- some sort of a major step change, but it's a continuation of the pressures and conversations that have been ongoing for a long time.

[Operator]

And we'll take our next question from Nigel Pittaway with Citi.

[Nigel Pittaway, analyst]

First question just back on that $12 million in the general admin expenses. Presumably given the nature of that, that's not -- wasn't in your original 12% to 14% noncomp cost growth guidance for the full year. Is that a fair statement?

[Roger Thompson, executive]

Correct. Correct.

[Nigel Pittaway, analyst]

[ Yes, that wasn't in the ] guidance. Yes. Okay. Next if you take the [ LTIC ] projection sheet you referred to in the appendix, it does seem as if the first quarter was a relatively low number for [ LTIC ] relative to what you're expecting in the next 3 quarters? Firstly, is that the case? And secondly, I guess what's the reason for that? And is there any guidance you can give in how that's likely to [indiscernible] quarter-on-quarter?

[Roger Thompson, executive]

Yes, the first quarter is a light quarter because of the way that some of our schemes are maturing and rolling off. So we are adding -- effectively we had a month of from couple of our schemes in the accounting them, Nigel. So the first quarter is a little bit light, like you say, is a little bit light and that's part of the reason why we've given this page. So you should expect all other things being equal, as we've said that there will be some moves in here, because some of these grants are paid out in mutual funds. And therefore, they will be subject to movements, et cetera, but the 184 is the number that you should be expecting for this year.

[Nigel Pittaway, analyst]

Okay. And then just maybe finally on your progressive dividend statements on the quarter, are you basically saying about progressive it goes up every year, is that basically what you're saying by using the word progressive? Or are you expecting actually on a quarterly basis that it moves up?

[Roger Thompson, executive]

Yes, certainly, and obviously, as Nigel it is different to how Henderson would have been under the U.K./Australia listing. The quarterly figures are generally kept throughout the whole year. Rather than move on a quarter-by-quarter basis. And what we mean by progressive is it should broadly match earnings, but obviously, we also expect it to be stable. So earnings will fluctuate up and down. While we would like to keep the dividend to be more stable. So it won't quite mirror earnings on a short-term basis, but on a earnings growth, but on a longer-term basis dividend growth should broadly match earnings growth.

[Operator]

We'll take our next question Brendan Carrig with Macquarie. Now we'll take our question from Chris Harris with Wells Fargo.

[Christopher Harris, analyst]

A question on your Fixed Income platform. Data we track is showing a fair amount of outflow on the Retail side in the U.S. I was just wondering if you could expand on that a little bit, maybe what's driving that? And I think the industry flows are actually pretty good. So maybe what you guys are seeing versus the industry?

[Andrew Formica, executive]

Hi, Chris, it's Andrew here. We had 1 large client who is a long-term investor in some of our fixed income range. They do sort of annual rebalance based on performance, and where their reweighting is. That's done in January. That was pretty much the big impact there. When you actually strip that out, and you look at the underlying trends month-on-month, and over the quarter, we would actually believe that it appeared that we're doing better than the industry. We're probably gaining share in that. So I think the intermediary flow you're referring to really was predominantly 1 client who has an annual rebalance program to where they would like to be through rest of the year. And that's just sometimes you are winner as that, sometimes you are looser, in this case it was taken money out. It's not performance-related or really even in the asset class, it's where they want to be in their asset allocation decision.

[Operator]

And there are no more questions in the queue at this time. I would like to turn the conference back over to our speakers for any closing remarks.

[Richard Weil, executive]

Thank operator. This is Dick Weil. Thank you, everyone, for joining us today. Let me just offer some concluding thoughts for you. First, obviously, a key message that Andrew highlighted at the top, investment performance continues to be strong. As an active Asset Manager, the dynamics that we've seen in the first quarter allow us to demonstrate our value to the clients as we help them achieve their long-term financial goals and help them understand the volatility that they're seeing. We are pleased with our outcome year-to-date. Second, we finished the quarter with slightly higher AUM. And while flows improved compared to the prior quarter, they are still not where we need them to be. Despite the net outflows in the quarter we are seeing good early signs in revenue synergies and we are optimistic about the future prospects for our business given the global distribution footprint that we have and the range of excellent product offerings. The third piece is obviously the financial results. They were strong, they reflect the growing economies of scale that we promised in our merger, and we believe we are delivering. And so, I think that's in good shape. As we approach the first anniversary of Janus Henderson, we're pleased with the pace of our integration, we remain disciplined in our financial investment and we are focused on building sustainable growth for you our owners. Thank you for joining us today. We look forward to speaking with you again in August.

[Operator]

And this concludes today's conference call. Thank you for attending.